Lawsuit Accuses GEICO of Selling Policies Under State Minimums

GEICO is facing a federal lawsuit claiming the insurer sold uninsured/underinsured motorist (UM/UIM) coverage with lowered limits without getting the required consent of policyholders.

The class-action lawsuit, filed in New Jersey federal court earlier this month by lead plaintiff Shannon Ensey, alleges that GEICO “has had a policy and practice of deceptively selling” policies with UM/UIM limits less than the bodily injury liability (BIL) limits set by the state.

Ensey alleges that she had her UM/UIM coverage automatically set by GEICO at $25,000 per person when Ensey changed her standard automobile insurance policy limits in January 2008, according to the suit, which added that the same practice occured with “numerous” other policyholders.

Under state law, the court filing says, drivers should be notified by the insurer that they have the option to purchase coverage limits at least up to $250,000 per person and $500,000 per accident.
Instead, according to the lawsuit, Ensey and other plaintiffs were not offered or informed about the option to obtain higher UM/UIM limits, which GEICO often set at a default $25,000 no matter what level of BIL coverage was provided by the policy.

State law requires that a policyholder submit written consent whenever they elect to have UM/UIM coverage below the “statutory default maximum limit” of $250,000, according to the documents.

“Thousands of standard automobile liability insurance policies [were sold] that have contained — and today continue to contain — UM/UIM coverage limits up to the BIL coverage limits or $250,000 (whichever was less),” the lawsuit reads.

Ensey did not discover that she had insufficient UM/UIM coverage until she was involved in an accident with an underinsured motorist in August 2008. Ensey incurred medical expenses from that crash “far in excess of $25,000.” GEICO refused to pay for medical bills above that UM/UIM limit that the insurer sold to her.

“These standard acts and practices of Geico have been consumer oriented, have caused ascertainable losses to consumers who have submitted such claims,” according to the lawsuit.

In addition, the lawsuit alleges that GEICO allowed unlicensed service representatives to sell policies and change amounts of insurance coverage.

The lawsuit was filed on Dec. 14 along with issuance of summons to GEICO. The insurer has 21 days after receiving the summons to reply to the plaintiff’s complaint.

About Ben Zitney

Benjamin Zitney has been covering the auto insurance industry for the past 2.5 years. Before coming to Online Auto Insurance News, he produced an extensive company history of the 30-year-old California Joint Powers Insurance Authority and worked at the Cal State Long Beach Daily Forty-Niner as a reporter, copy editor and news editor.